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Tax Year 2026Updated July 13, 2026

Does Massachusetts Tax Tips in 2026?

Yes - Massachusetts taxes tip income in 2026. Massachusetts DOR's final Technical Information Release, TIR 26-4 (June 23, 2026), lists the OBBBA tips deduction (IRC §224) as not adopted. Massachusetts conforms to the IRC as of January 1, 2024, and does not follow this 2025 change. Tips remain fully subject to the Massachusetts 5% income tax.

How Massachusetts's Tips Tax Treatment Works

Massachusetts uses a fixed-date IRC conformity approach: the state's income tax code references the Internal Revenue Code as of January 1, 2024. Any federal tax law changes enacted after that date - including the entire OBBBA package signed into law in 2025 - do not automatically flow through to Massachusetts unless the legislature specifically adopts them or updates the conformity date.

Massachusetts DOR's final Technical Information Release, TIR 26-4 (June 23, 2026), sets out which OBBBA provisions Massachusetts adopts. Its chart lists "Sec. 70201. No tax on tips" as No. Tip income therefore remains fully taxable at the Massachusetts 5% rate.

The federal deduction still lowers your federal tax. It does not carry over to Massachusetts.

Federal Tips Deduction Quick Reference

DetailValue
IRC Section§224 (OBBBA)
Maximum deduction$25,000 tips
Deduction typeAbove-the-line (Schedule 1-A)
FICA still applies?Yes (Social Security 6.2% + Medicare 1.45%)
MFS eligible?No (MFJ or Single/HoH only)
Effective datesJan 1, 2025 – Dec 31, 2028
Massachusetts treatmentDoes not conform

Worked Examples Comparing Federal and Massachusetts Treatment

Example 1: Restaurant server (single filer, $40,000 income, $15,000 in tips)

Federal return:
Qualified tip income: $15,000
Tips deduction claimed: $15,000 (capped at $25,000)
Estimated federal tax savings: $1,800.00

Massachusetts return:
Massachusetts does not recognize the federal tips deduction. The full $15,000 in tip income remains subject to the Massachusetts 5% income tax. Estimated MA tax on this tip income: $750. (TIR 26-4.)

Example 2: Bartender (single filer, $70,000 income, $25,000 in tips - federal cap reached)

Federal return:
Qualified tip income: $25,000
Tips deduction claimed: $25,000 (capped at $25,000)
Estimated federal tax savings: $5,500.00

Massachusetts return:
Massachusetts does not recognize the federal tips deduction. The full $25,000 in tip income remains subject to the Massachusetts 5% income tax. Estimated MA tax on this tip income: $1,250. (TIR 26-4.)

Massachusetts Final Guidance

Status: non-conformity confirmed. TIR 26-4 (final, June 23, 2026) lists the OBBBA tips and overtime deductions as not adopted. It does not address the senior deduction, whose Massachusetts treatment remains unconfirmed.

Massachusetts Flat Rate Means Simple but No Relief

Massachusetts imposes a flat 5% income tax rate on most income (with an additional 4% surtax on income over $1,107,750 for TY2026). Unlike graduated-bracket states where lower-income workers might fall into a lower bracket, every dollar of tip income in Massachusetts is taxed at the same 5% rate. A server earning $15,000 in tips owes $750 in Massachusetts income tax on that tip income alone - with no deduction, exclusion, or credit to offset it.

Massachusetts does not use a standard deduction; instead, it provides personal exemptions ($4,400 for single filers, $8,800 for MFJ). These exemptions are typically exhausted by regular wage income before tip income is considered.

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Frequently Asked Questions

Does Massachusetts conform to the federal tips deduction under the OBBBA?
No. Massachusetts DOR's final TIR 26-4 (June 23, 2026) lists "Sec. 70201. No tax on tips" as not adopted. Massachusetts conforms to the IRC as of January 1, 2024, and the OBBBA was enacted in 2025, outside that window. Tips remain subject to Massachusetts income tax.
Is the Massachusetts non-conformity on tips final?
Yes. Massachusetts DOR published its final Technical Information Release, TIR 26-4, on June 23, 2026. Its conformity chart lists the federal tips deduction as not adopted.
What is Massachusetts's income tax rate on tip income?
Massachusetts imposes a flat 5% income tax on most income, including tips. An additional 4% surtax applies to taxable income exceeding $1,107,750 for tax year 2026, bringing the top rate to 9% - but this threshold would only affect tipped workers with very high total incomes.
Does the federal tips deduction reduce my Massachusetts tax?
No. TIR 26-4 lists the tips deduction as not adopted, so tip income stays in Massachusetts income and is taxed at 5%. The federal deduction still applies on your federal return.
Why doesn't Massachusetts automatically adopt the federal tips deduction?
Massachusetts conforms to the Internal Revenue Code as of January 1, 2024 - a fixed date set by state law. The OBBBA, which created the tips deduction, was not enacted until 2025. Because the OBBBA falls outside the conformity window, its provisions do not automatically apply to Massachusetts unless the legislature acts to update the conformity date or specifically adopts the deduction.
Could Massachusetts change its position and adopt the tips deduction?
It is possible. The Massachusetts Legislature could update the IRC conformity date or pass specific legislation adopting the OBBBA tips deduction. However, no such legislation is currently pending. The draft TIR from October 2025 strongly suggests the Department of Revenue's position is non-conformity.